News / Baumann: commissioners to target 3% efficiencies

He said 2016/17 was a critical year, in which the NHS had to use the £3.8bn real-terms increase in funding to create financial stability and balance across the whole of the service and to pick up the pace of transformation.

At the national commissioning body’s May board meeting, he said achieving this balance was proving challenging for three reasons. First, the provider sector 2015/16 deficit was £650m higher than the £1.8bn sustainability funding targeted to help the sector get into financial balance in 2016/17.

Second, commissioners had to ensure they had enough financial flexibility to deal with any risks arising in year. To achieve this, they had set aside a risk reserve of 1% of budget.

‘This has in turn required commissioners to draw up plans for significantly higher levels of efficiency gains through reducing demand or commissioning more cost-effective ways of delivering care, as opposed to the operational efficiencies that providers are accountable for. In 2016/17 commissioner efficiencies will need to be running at 3%, whereas in previous years it was closer to 2%. That’s a big concentrating factor in the plans of commissioners.’

In 2015/16, commissioners planned to deliver QIPP savings of £2.2bn and by year-end £1.9bn had been realised.

The third factor was to ensure enough activity was commissioned and funded to clear operational backlogs.

Most contracts had now been agreed. ‘CCG and NHS England operating plans show a balanced financial position, with a 1% risk reserve set aside as planned,’ said Mr Baumann (above). ‘But I have to say, with a level of risk, particularly with regard to the level of efficiencies, that is significantly higher than in previous years. It will require us to build on the vigilance of our monitoring, particularly the speed of our support and intervention where individual organisations show signs of deviation from plans.’

NHS Improvement was working with providers to produce an overall balanced position in 2016/17. NHS England chief executive Simon Stevens told the board: ‘Over the next three to four weeks, NHS Improvement will be having conversations with trusts about what their control totals need to be. That’s not a straightforward exercise. We have seen substantial cost growth over the last 12 to 24 months and we will have to tackle that at source.’

Mr Baumann said the commissioning sector had an overall underspend of £599m in 2015/16. Clinical commissioning groups recorded an aggregate deficit of £16m – 62 had underspends against plan, totalling £122m, while 39 CCGs had overspends against plan of £151m.

However, the overall position was offset by a £13m underspend on the quality premium. The May board papers added that 31 CCGs finished the year with cumulative deficits, 10 of which were unplanned.

The overall sector position was bolstered by a small underspend in specialised commissioning (£14m) – the first in recent history. However, within this sector, the cancer drugs fund (CDF) overspent by £126m (37%), despite actions taken during the year to limit spending. A new CDF scheme begins in July, which NHS England hopes will ensure that spending remains with the agreed £340m budget.

There were significant underspends in central programme costs (£242m) and other central budgets (£219m). The former included reduced redundancy and transition costs, the freezing of contingencies and unplanned rent rebates. Most of this is non-recurrent and the recurrent elements have been reflected in reduced budgets for 2016/17, Mr Baumann said.